What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2021-02-04 · 123 added, 69 removed, 248 unchanged (44% of the section changed)

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The following discussion should be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this document.

The Company operates a network of e-commerce marketplaces that enable buyers and sellers to transact in an efficient, automated environment offering over 600 product categories.

The Company’s marketplaces provide professional buyers access to a global, organized supply of new, surplus, and scrap assets presented with digital images and other relevant product information.

Additionally, the Company enables its corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation, and sale of surplus assets.

The Company operates a network of e-commerce marketplaces that power the circular economy which benefits businesses, society, and the environment through the safe and effective resale and redeployment of surplus assets;

reducing waste, carbon emissions and transportation costs;

and by creating markets for items that would otherwise be landfilled.

Our marketplaces enable buyers and sellers to transact in an efficient, automated environment offering over 600 product categories and provide professional buyers access to a global, organized supply of new, surplus, and scrap assets presented with digital images and other relevant product information.

Our marketplaces enable corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation, and sale of surplus assets.

The Company's services include program management, valuation, asset management, reconciliation, refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, compliance and risk mitigation, as well as self-directed service tools for its sellers.

The Company organizes the products on its marketplaces into categories across major industry verticals such as consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, energy equipment, industrial capital assets, fleet and transportation equipment and specialty equipment.

Currently, the Company’s marketplaces are:

www.liquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, and www.go-dove.com.

We also operate a global search engine for used machinery and equipment at www.machinio.com.

The Company’s marketplaces are:

www.liquidation.com, www.govdeals.com, www.secondipity.com, and www.go-dove.com.

We also operate a global search engine for listing used machinery and equipment for sale at www.machinio.com.

The Company has over 15,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies.

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The restrictions on economic activity were caused, in part, by business closures, limitations on the operations of business activity and significant prioritization of essential business functions.

Starting in May 2020, we have seen subsequent increases in Gross Merchandise Volume (GMV) and revenues as businesses and governments re-opened from government ordered closures which, combined with cost control measures, generated positive net income for the third and fourth quarters of fiscal 2020, and continued into the first quarter of fiscal 2021.

However, the likelihood, magnitude and timing of business developments across our segments are difficult to predict given the current economic uncertainty, unknown duration and overall impact of the global pandemic.

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Throughout the COVID-19 pandemic, the Company has actively monitored its liquidity position and working capital needs.

In the first quarter of fiscal 2021, the Company determined that its liquidity position and working capital was more than sufficient to meet its projected needs and commenced share repurchases, acquiring 309,496 shares for $4.1 million during the three months ended December 31, 2020.

In the first and second quarters of fiscal 2021, the Company determined that its liquidity position and working capital was more

than sufficient to meet its projected needs and commenced share repurchases, acquiring 647,583 shares for $12.0 million and 957,079 shares for $16.1 million during the three and six months ended March 31, 2021, respectively.

In the longer term, we continue to be highly focused on creating efficiencies and benefits for our sellers and our buyers by focusing on the platform services and support that will deliver optimal liquidity in the reverse supply chain and further enable our growth through an asset light, low-touch marketplace solution.

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This flow of goods in turn attracts an increasing number of professional buyers to our marketplaces .

During the twelve months end ed December 31, 2020, the approximate number of registered buyers increased from 3,630,000 to 3,839,000, or 5.8%.

During the twelve months end ed March 31, 2021, the approximate number of registered buyers increased from 3,675,000 to 3,888,000, or 5.8%.

Substantially all of our revenue is earned through the following transaction models:

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The proceeds paid by buyers also include transaction fees, referred to as buyer premiums.

For the three months ended December 31, 2020 and 2019, our purchase transaction model accounted for 16.2% and 20.5% of our GMV, and 55.7% and 61.3% of our total revenues, respectively .

For the three and six months ended March 31, 2021, our purchase transaction model accounted for 18.2% and 17.2% of our GMV, and 58.2% and 57.0% of our total revenues, respectively.

For the three and six months ended March 31, 2020, our purchase transaction model accounted for 24.7% and 22.6% of our GMV, and 66.6% and 64.1% of our total revenues, respectively.

These amounts included sales of commercial merchandise sourced from vendor contracts with Amazon.com, Inc.

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The commercial merchandise we purchased under these contracts with Amazon.com, Inc.

represented 60.0% and 48.3% of consolidated Costs of goods sold for three months ended December 31, 2020 and 2019, respectively.

represented 61.2% and 60.6% of consolidated Costs of goods sold for the three and six months ended March 31, 2021, respectively, and 55.3% and 51.9% of consolidated Cost of goods sold for the three and six months ended March 31, 2020, respectively.

Consignment model — fee revenue.

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In addition to seller commissions, we also collect buyer premiums.

For the three months ended December 31, 2020 and 2019 , our consignment model accounted for 83.8% and 79.5% of our GMV, and 36.7% and 32.0% of our total revenues, respectively.

For the three and six months ended March 31, 2021, our consignment model accounted for 81.8% and 82.8% of our GMV, and 34.4% and 35.5% of our total revenues, respectively.

For the three and six months ended March 31, 2020, our consignment model accounted for 75.3% and 77.4% of our GMV, and 27.6% and 29.7% of our total revenues, respectively

Other — fee revenue .

We also earn non-consignment fee revenue from Machinio's sales listing subscription and MachineryHost services, as well as other services including returns management, refurbishment of assets, and asset valuation services.

Other revenues accounted for 7.4% and 7.5% of our total revenues for the three and six months ended March 31, 2021, respectively, and 5.8% and 6.2% of our total revenues for the three and six months ended March 31, 2020, respectively.

Industry trends.

While we are experiencing challenges presented by the COVID-19 pandemic, we believe there are several industry trends positively impacting the long-term growth of our business including:

While we continue to review and assess the COVID-19 pandemic's impact on our customers, our suppliers, and our business, we believe there are several industry trends positively impacting the long-term growth of our Company including:

(1) the increase in the volume of returned merchandise handled both online and in stores as online and omni-channel retail grow as a percentage of overall retail sales;

(2) the increase in government regulations and the need for corporations to have sustainability solutions necessitating verifiable recycling and remarketing of surplus assets;

(3) the increase in outsourcing the disposition of surplus and end-of-life assets by corporations and government entities as they focus on reducing costs, improving transparency, compliance and working capital flows, and increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain;

(3) the increase in outsourcing the

disposition of surplus and end-of-life assets by corporations and government entities as they focus on reducing costs, improving transparency, compliance and working capital flows, and increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain;

(4) the increase in buyer demand for surplus merchandise as consumers trade down by purchasing less expensive goods and seek greater value from their purchases, which results in lower per unit prices and margins in our retail goods vertical;

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under which we acquire and sell commercial merchandise.

The property we purchased under these contracts represented 60.0% and 48.3% of consolidated cost of goods sold for the three months ended December 31, 2020 and 2019, respectively.

The property purchased under this contract represented 61.2% and 55.3% of consolidated Cost of goods sold for the three months ended March 31, 2021 and 2020, respectively, and 60.6% and 51.9% of consolidated Cost of goods sold for the six months ended March 31, 2021 and 2020, respectively.

These contracts are included within our RSCG segment.

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In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database.

As of December 31, 2020 and 2019, we had approximate ly 3,839,000 and 3,630,000 registered buyers, respectively.

As of March 31, 2021 and 2020, we had approximately 3,888,000 and 3,675,000 registered buyers, respectively.

Total auction participants.

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In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts.

During the three months ended December 31, 2020 and 2019, approximatel y 517,000 and 453,000, r espectively, total auction participants participated in auctions on our marketplaces.

During the three months ended March 31, 2021 and 2020, approximately 561,000 and 490,000, respectively, total auction participants participated in auctions on our marketplaces.

During the six months ended March 31, 2021 and 2020, approximately 1,078,000 and 945,000, respectively, total auction participants participated in auctions on our marketplaces.

Completed transactions.

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Similar to GMV, we believe that completed transactions is a key business metric because it provides an additional measurement of the volume of activity flowing through our marketplaces.

During the three months ended December 31, 2020 and 2019, we completed approxim ately 152,000 and 136,000 tr ansactions, respectively.

During the three months ended March 31,

2021 and 2020, we completed approximately 174,000 and 150,000 transactions, respectively.

During the six months ended March 31, 2021 and 2020, we completed approximately 326,000 and 286,000 transactions, respectively.

Non-GAAP Financial Measures

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The table below reconciles net income (loss) to EBITDA and Adjusted EBITDA for the periods presented.

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

(in thousands) (Unaudited)

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Interest and other income, net 1

69 (167) (34) (332)

Provision for income taxes 407 43 704 501

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Stock compensation expense

1,761 1,231 3,990 2,270

Acquisition costs and impairment of long-lived assets 2

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1 Represents Interest and other income, net, per the Statement of Operations, excluding the non-service components of net periodic pension (benefit).

2 Acquisition costs, impairment of long-lived assets, fair value adjustments to acquisition earn-outs, and business realignment expenses are components of Other operating expenses on the Statements of Operations.

3 Business realignment expense includes the amounts accounted for as exit costs under ASC 420 as described in Note 11 to the Consolidat ed Financial Statements, and the related impacts of business realignment actions subject to other accounting guidance.

There were no related impacts for the three months ended December 31, 2020 and 2019.

There were no related impacts for the three and six months ended March 31, 2021 and 2020.

Critical Accounting Policies and Estimates

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General and administrative expenses include all corporate and administrative functions that support our operations and provide an infrastructure to facilitate our future growth.

These expenses are generally more fixed in

nature than our other operating expenses and do not significantly vary in response to the volume of merchandise sold through our marketplaces.

These expenses are generally more fixed in nature than our other operating expenses and do not significantly vary in response to the volume of merchandise sold through our marketplaces.

Depreciation and amortization.

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Other operating expenses (income).

Other operating expense includes the change in fair value of contingent consideration, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Other operating expense includes impairment of long-lived assets, the change in fair value of contingent consideration, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Interest and other income, net.

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For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income (loss).

Our effective income tax rate before discrete items was 6.2% for the three months ended December 31, 2020.

Our effective income tax rate before discrete items was 6.7% for the six months ended March 31, 2021.

The effective tax rate differed from the statutory federal rate of 21% primarily as a result of the utilization of net operating losses and the impact of foreign, state, and local income taxes and permanent tax adjustments.

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The following table sets forth, for the periods indicated, our operating results:

Three Months Ended December 31,

(dollars in thousands) 2020 2019 $ Change % Change

Three Months Ended March 31, Six Months Ended March 31,

(dollars in thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change

Revenue $ 35,968 $ 35,203 $ 765 2.2 % $ 67,040 $ 65,552 $ 1,488 2.3 %

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Depreciation and amortization 1,670 1,577 93 5.9 3,541 3,149 392 12.4

Other operating expenses 4 193 (189) (97.9)

Other operating expenses (income) 206 (12) 218 NM 210 181 29 16.0

Total costs and expenses 56,148 57,276 (1,128) (2.0) 107,273 111,770 (4,497) (4.0)

Income (loss) from operations 4,626 (4,990) 9,616 NM

Income (loss) from operations 5,638 (4,452) 10,090 NM 10,265 (9,442) 19,707 NM

Interest and other income, net (29) (257) 228 88.7 (214) (509) 295 58.0

Income (loss) before provision for income taxes 4,811 (4,738) 9,549 NM

Income (loss) before provision for income taxes 5,667 (4,195) 9,862 NM 10,479 (8,933) 19,412 NM

Provision for income taxes 407 43 364 846.5 704 501 203 40.5

Net income (loss) $ 4,514 $ (5,196) $ 9,710 NM

Net income (loss) $ 5,260 $ (4,238) $ 9,498 NM $ 9,775 $ (9,434) $ 19,209 NM

NM = not meaningful

The following table presents segment GMV, revenue, gross profit (which is calculated as total revenue less cost of goods sold (exclusive of depreciation and amortization)), and gross profit margin for the periods indicated:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(dollars in thousands) 2021 2020 2021 2020

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Gross profit margin 73.6 % 69.9 % 76.7 % 71.7 %

GMV $ — $ — $ — $ —

Total revenue $ 2,240 $ 1,706 $ 4,354 $ 3,556

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Gross profit margin 57.3 % 49.6 % 58.3 % 50.4 %

Three Months End ed December 31, 2020 Compared to the Three Months Ended December 31, 2019

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

Segment Results

Revenue from our GovDeals segment increased 35.0%, or $2.8 million, due to a 35.9%, or $28.4 million, increase in GMV from adding new sellers and an increase in recovery rates on assets sold.

Revenue from our GovDeals segment increased 40.3%, or $3.2 million, due to a 43.8%, or $33.8 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories.

As a result of the increase in revenues, gross profit increased 42.6%, or $3.1 million.

Gross profit margin remained relatively consistent between the periods.

Revenue from our RSCG segment increased 10.1%, or $3.2 million, due to an 29.7%, or $11.8 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers.

Revenues did not increase at the same rate as GMV due an increase in the mix of transactions conducted under the consignment model.

Revenue from our RSCG segment increased 7.8%, or $2.8 million, due to a 32.2%, or $14.3 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail.

Revenues did not increase at the same rate as GMV due to an increase in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 28.6%, or $3.5 million.

Gross profit margin increased 6.6% due to an increase in the mix of transactions conducted under the consignment model and improved recovery rates on assets sold.

Revenue from the CAG segment decreased by 0.4% while GMV increased by 5.2%, or $1.5 million.

The increase in GMV was primarily driven by higher levels of consignment activity in North America within our heavy equipment and industrial verticals, as well as increases in principal transactions across the EMEA and Asia-Pacific regions.

Gross profit within the CAG segment increased 9.4%, or $0.5 million, due to an increase in recovery rates on principal transactions.

Revenue from the CAG segment increased by 34.8%, or $2.5 million , due to a 65.5%, or $14.9 million, increase in GMV from continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally .

Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations and in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 42.0%, or $2.1 million.

Gross profit margin increased 3.7% due to increases in the mix of transactions conducted under the consignment model and in the recovery rates on principal transactions.

Revenue from our Machinio segment increased 31.3%, or $0.5 million, due to an increase in subscription activity.

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Refer to the discussion of Segment Results above for discuss ion of the increase in revenue.

Cost of goods sold.

Cost of goods sold decreased $1.6 million, or 6.6%, primarily due to lower cost of sales associated with the principal transactions, which benefited from higher recovery rates during the quarter, and an increase in the mix of consignment transactions.

Cost of goods sold (excludes depreciation and amortization).

Cost of goods sold decreased $0.2 million, or 0.9%, which changed at a lower rate than Revenue primarily due to an increase in the mix of transactions conducted under the consignment model.

Technology and operations expenses.

Technology and operations expenses decreased $0.7 million, or 5.9%.

The decrease included $1.0 million in reductions in the CAG and GovDeals segments driven by actions taken to reduce operating expenses in response to the COVID-19 pandemic.

Technology and operations expenses increased $0.5 million, or 4.3% to support the increased transaction volumes in the RSCG and CAG segments.

Sales and marketing expenses.

Sales and marketing expenses decreased $1.2 million, or 11.9%, due to actions taken to reduce operating expenses in response to the COVID-19 pandemic.

The impact of these actions on our operating expense levels will lessen as business conditions continue to recover.

These decreases were offset by a $0.3 million increase in operations expenses from the continued growth in the RSCG and Machinio segments.

These decreases were partially offset by an increase in marketing expenses to promote our consolidated marketplace and expand market share in key verticals.

General and administrative expenses.

General and administrative expenses decreased $0.5 million, or 6.8%, and was impacted by actions taken to reduce operating expenses in response to the COVID-19 pandemic.

The impact of the actions taken to reduce operating expenses in response to the COVID-19 pandemic will lessen as business conditions continue to recover.

Depreciation and amortization .

Depreciation and amortization expense were consistent between the three months ended March 31, 2021 and 2020.

Other operating expenses (income) .

Other operating expenses of $0.2 million for the three months ended March 31, 2021 primarily related to a long-lived asset impairment charge.

Other operating (income) was not significant for the three months ended March 31, 2020.

Interest and other income, net.

Interest and other income, net decreased $0.2 million due the effect of changes in foreign exchange rates.

Provision for income taxes .

Provision for income taxes increased $0.4 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Six Months Ended March 31, 2021 Compared to the Six Months Ended March 31, 2020

Segment Results

Revenue from our GovDeals segment increased 37.6%, or $6.0 million, due to a 39.8%, or $62.2 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories.

As a result of the increase in revenues, gross profit increased 39.8%, or $5.9 million.

Gross profit margin remained relatively consistent between the periods.

Revenue from our RSCG segment increased 8.9%, or $6.0 million, due to an 31.0%, or $26.1 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail.

Revenues did not increase at the same rate as GMV due to an

increase in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 34.6%, or $7.9 million.

Gross profit margin increased 7.9% due to an increase in the mix of transactions conducted under the consignment model and improved recovery rates on assets sold.

Revenue from the CAG segment increased by 16.2%, or $2.4 million due to a 31.5%, or $16.5 million increase in GMV continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally .

Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations and in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 24.3% or $2.6 million.

Gross profit margin increased 5.0% due to increases in the mix of transactions conducted under the consignment model and in the recovery rates on principal transactions.

Revenue from our Machinio segment increased 22.4%, or $0.8 million, due to an increase in subscription activity.

As a result of the increase in revenues, gross profit increased 21.4%, or $0.7 million.

Consolidated Results

Total consolidated revenue increased $15.2 million, or 14.9%.

Refer to the discussion of Segment Results above for discuss ion of the increase in revenue.

Cost of goods sold (excludes depreciation and amortization).

Cost of goods sold decreased $1.8 million, or 3.6%, which changed at a lower rate than Revenue primarily due to lower cost of sales associated with the principal transactions, which benefited from higher recovery rates during the year, and an increase in the mix of transactions conducted under the consignment model.

Technology and operations expenses.

Technology and operations expenses were consistent between the six months ended March 31, 2021 and 2020 as the actions taken to reduce operating expenses in response to the COVID-19 pandemic were offset by an increase in operations expenses to support the increased transaction volumes in the RSCG segment.

The impact of the actions in response to the COVID-19 pandemic on our operating expense levels will lessen as business conditions continue to recover.

Sales and marketing expenses.

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Depreciation and amortization .

Depreciation and amortization expense increased $0.3 million, or 19.0%, due to an increase in amortization of capitalized software related to the continued development and enhancement of our e-commerce platform.

Other operating expenses .

Other operating expenses were not significant for the three months ended December 31, 2020.

Other operating expenses of $0.2 million for the three months ended December 31, 2019 represents the increase in the fair value of the Machinio earn-out liability, which was paid in full during the three months ended March 31, 2020.

Depreciation and amortization expense increased $0.4 million, or 12.4%, due to an increase in amortization of capitalized software related to the continued development and enhancement of our e-commerce platform and tools.

Other operating expenses (income) .

Other operating expenses were consistent between the six months ended March 31, 2021 and 2020.

Interest and other income, net.

Interest and other income, net was consistent between the three months ended December 31, 2020 and 2019.

Interest and other income, net decreased $0.3 million due the effect of changes in foreign exchange rates.

Provision for income taxes .

Provision for income taxes decreased $0.2 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Provision for income taxes increased $0.2 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Liquidity and Capital Resources

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From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions.

As of December 31, 2020, we had $77.8 million in cash and cash equivalents.

As of March 31, 2021, we had $87.6 million in cash and cash equivalents.

The COVID-19 pandemic has caused the Company's GMV and revenues to fluctuate, and the Company implemented cost control measures to protect against those fluctuations.

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tax expense on the undistributed earnings of foreign subsidiaries because we intend to indefinitely reinvest the earnings of these foreign subsidiaries outside the United States.

The amount of such undistributed foreign earnings was $5.1 million as of December 31, 2020.

As of December 31, 2020 and September 30, 2020, $19.2 million and $19.5 million, respectively, of cash and cash equivalents was held outside of the U.S.

We are authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors.

The amount of such undistributed foreign earnings was $6.0 million as of March 31, 2021.

As of March 31, 2021 and September 30, 2020, $19.9 million and $19.5 million, respectively, of cash and cash equivalents was held outside of the U.S.

We have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors.

Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate.

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The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.

The Company repurchased 309,496 shares for $4.1 million under this program during the three months ended December 31, 2020 .

As of December 31, 2020 , the Company may repurchase an additional $2.0 million of shares under this program.

As of the fiscal year ended September 30, 2020, we had $6.1 million of remaining share repurchase authorization.

On March 8, 2021, our Board of Directors authorized an additional $10 million of share repurchases of the Company's outstanding shares of common stock through March 31, 2023.

The Company repurchased 647,583 shares for $12.0 million and 957,079 shares for $16.1 million under this program during the three and six months ended March 31, 2021, respectively.

As of March 31, 2021, the Company had no remaining authorization to repurchase shares under this program.

On May 3, 2021, the Company's Board of Directors authorized the repurchase of up to $15 million of the Company's outstanding shares of common stock through June 30, 2023.

Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet based payment system, as methods of payments.

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Changes in Cash Flows:

Three Months Ended December 31, 2020 Compared to the Three Months Ended December 31, 2019

Net cash provided by (used in) operating activities was $6.0 million and $(18.6) million for the three months ended December 31, 2020 and 2019, respectively.

The $24.6 million increase in cash provided by operations between periods was attributable changes in payables to sellers, driven by timings of payments, increases in transactions that have been paid for but not yet picked up due to delays caused the COVID-19 pandemic;

Six Months Ended March 31, 2021 Compared to the Six Months Ended March 31, 2020

Net cash provided by (used in) operating activities was $31.3 million and $(12.1) million for the six months ended March 31, 2021 and 2020, respectively.

The $43.5 million increase in cash provided by operations between periods was attributable to $21.2 million of higher net income as adjusted for non-cash items;

changes in payables to sellers, driven by increasing transactions volumes;

changes to accounts payable, accrued expenses and other liabilities driven by the management of working capital;

$10.9 million of higher net income as adjusted for non-cash items;

and partially offset by a $4.9 million increase in inventory driven by our RSCG and CAG segments.

Our working capital accounts are subject to natural variations depending on the timing of cash receipts and payments, and our variations in our transaction volumes are related to settlements between our buyers and sellers.

However, the Company expects to use working capital in the near-term as transaction volumes fluctuate and as the temporary responses to the COVID-19 pandemic implemented in the third quarter of fiscal 2020 continue to unwind.

Net cash (used in) provided by investing activities was $(0.8) million for the three months ended December 31, 2020, and $6.2 million for the three months ended December 31, 2019.

The $(7.0) million increase in cash used in investing activities was driven by the $(5.0) million net impact of non-recurring events during the three months ended December 31, 2019 including a $(25.0) million purchase of short-term investments offset by $30.0 million in maturities from short-term investments.

A further increase in the cash used in investing activities was a result of proceeds from the JTC promissory note being $2.6 million during the three months ended December 31, 2019 compared to $0.5 million during the three months ended December 31, 2020.

Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and our variations in our transaction volumes are related to settlements between our buyers and sellers.

However, there have been no significant changes to the working capital requirements for the Company.

Net cash (used in) provided by investing activities was $(1.6) million for the six months ended March 31, 2021, and $19.7 million for the six months ended March 31, 2020.

The $(21.3) million increase in cash used in investing activities was driven by $(20.0) million net impact of maturities of Short-term investments during the six months ended March 31, 2020 as the Company transitioned to using Cash equivalent money market funds in its treasury strategy.

A further increase in the cash used in investing activities was a result of proceeds from the JTC promissory note being $2.6 million during the six months ended March 31, 2020 compared to $0.8 million during the six months ended March 31, 2021.

The Company continues to monitor for changes that could impact the recoverability of the promissory note, which will depend on JTC's subsequent operating performance and ability to make the payments required by the new repayment schedule.

Net cash used in financing activities was $4.0 million for the three months ended December 31, 2020.

The $3.5 million increase in cash used by financing activities was primarily driven by $4.1 million in common stock repurchases.

Net cash used in financing activities was $19.0 million for the six months ended March 31, 2021, and $1.7 million for the six months ended March 31, 2020.

The $17.3 million increase in cash used by financing activities was primarily driven by $16.1 million in common stock repurchases and a $2.6 million increase in taxes paid associated with net settlement of stock

compensation awards from vesting of awards with market conditions due to the achievement of increases in the Company's share price.

Capital expenditures.

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We intend to fund those expenditures primarily from our existing cash balances and operating cash flows.

Our capital expenditures for the three months ended December 31, 2020 were $1.4 million.

As of December 31, 2020, we had no significant outstanding commitments for capital expenditures.

Our capital expenditures for the six months ended March 31, 2021 were $2.4 million.

As of March 31, 2021, we had no significant outstanding commitments for capital expenditures.

Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the development and deployment of new marketplaces, the introduction of new value-added services and the costs to establish additional distribution centers.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis